Chances are you’re still on the fence about whether now is the right time to move. With huge fluctuations in interest rates and a rising cost of living, it’s no wonder we’re all a bit unsure.
Here’s what you need to know about interest rates and getting a mortgage for your *dream* Postland home:
What influences mortgage rates?
Lenders take in to account a host of factors when determining mortgage rates, but one key factor is the cost of borrowing (the interest rate) which is set by the Bank of England base rate.
Should this interest rate rise, mortgage deals can become more expensive as lenders pass on the bank rate to their customers; a higher base rate usually means higher monthly mortgage payments.
What are the trends in interest rates right now?
The good news is that mortgage rates have dropped since their skyrocket at the end of 2022.
Now, rather than rates at 6.65% (thank you October 2022), the typical five-year fixed mortgage deal is below 5%, and some lenders such as Virgin Money and HSBC launched fixed-rate mortgages below 4% in February.
If you’re already tied into a fixed-rate deal, you’re protected from any fluctuations, but if you were considering an upgrade at the start of 2023, it is still possible to secure an affordable mortgage deal.
Are mortgages getting more expensive?
The great news is that since Rishi Sunak become prime minister the markets have calmed, and rates are decreasing.
In February 2023, typical two and five-year fixed rates fell for the third consecutive month, with rates for borrowers with a large 40% deposit, falling to around 4.96%.
The recent decrease in mortgage rates has helped to stabilise the property market, and even better news – the average house prices rose 1.1% between January and February.
If COVID has taught us anything, it’s that we’re all able to adapt to a “new normal”. Whilst it is unlikely that the market will retreat to low interest rates below 2%, the market is showing resilience and properties continue to be a profitable investment.
Which mortgage should you choose?
There are two main mortgage products: fixed rates and trackers.
Fixed rates:
Overview:
- You pay a set amount each month for a defined period
Pros:
- Easier to budget
- Payments remain constant even if interest rates rise
Cons:
- Some fixed-rate mortgages have an early repayment charge
- If interest rates go down during the fixed period, your payments won’t
Trackers:
Overview:
- Mortgage usually follows the Bank of England’s base rate
Pros:
- Currently priced lower than fixed deals
Cons:
- There’s a risk that rates will rise meaning a higher mortgage repayment
